Friday Rant: Another Form of Supply Risk — Organized Labor is More Out of Touch Than Ever

A visitor to our office earlier this week brought up his outsider view of Chicago as a city where organized labor was decimating the conference business. $444 per hour union forklift drivers will do that to you, I suppose. His observation was correct, however, given the recent flight of conferences from the city due to the added cost of not even being able to plug in your own laptop to a power source at McCormick Place, let alone all the other additional costs, driven up from a union with the historic "buying" power to put a mayor in office -- or not. Yet there are lessons in supply risk and organized labor for all of us that go far beyond Chicago's new "second" or even "third" city status for conferences, given their added cost in our windy confines.

The fundamental issue is that unions are currently striking and negotiating without any inkling about how challenging the overall economy remains -- for both private and public sector employers alike. Consider this recent story from the online edition of The Chicago Tribune that details how traffic is finally moving freely on our congested highways -- thanks to striking construction trade workers. The roads are clear because there's no work being done. According to the story, "labor groups representing about 100,000 union employees in the Chicago region" are on strike, seeking "a 5 percent annual wage increase for three years" relative to "an offer of 1 percent per year" the local government countered with.

The article notes that, "current wages range from $35.20 an hour for laborers to $45.10 an hour for operating engineers, according to the Mid-America Regional Bargaining Association." But in actuality, this means the full burdened cost -- including healthcare and pension -- for workers most likely exceeds $50 an hour on the low-end, representing a six figure package as it is. It's ironic, then, that the trades want even more given that "the recession has created unemployment rates in the construction trades ranging from 20 percent to 40 percent," according to experts the article cites.

It's rare that any business, union or individual could be so out of touch with reality as to demand so much in an environment where such a large percentage of a demographic are unemployed. Yet this is apparently how pockets of organized labor are looking at the economy. Companies doing business with suppliers dependent on organized labor -- let alone those reliant on organized labor where it is unavoidable, e.g., at certain ports -- should think twice about the dangers of depending on a constituency that is living in an economic world that's certainly not of this earth -- or this economy, for that matter.